Gain the tactical advantage by establishing accounts with multiple cryptocurrency exchange service. In this article, we will discuss four reasons for establishing and maintaining accounts with multiple cryptocurrency exchange services.
Over the the past year, the cryptocurrency market and related services has taken a great leap forward. New exchanges continue provide new products that address new and emerging consumer demands. However, not a single exchange service is the the single “go-to” for cryptocurrency traders. Until a single exchange service can provide the all-in-one solution, establishing and maintaining multiple in small handful of exchanges will be necessary for buying and selling cryptocurrency and maximize associated costs. Let’s discuss some of these reasons below.
Reason #1: Give Yourself Some Options
Cryptocurrency exchange services are online and therefore become prime targets for Distributed Denial of Service (DDoS) attack . DDoS against online platforms is the new normal as an increasing number of financial services (i.e banks, credit unions, and miscellaneous conveyance platforms) continue to offer new products and services online. Exchanges are no different from that respect. As a necessary defensive measure, online platforms (despite making heavy investments in cybersecurity) will need to suspend services (temporarily) to update software/hardware, fix vulnerabilities, and address other security-related issues. From that aspect, suspending services to better protect consumers is good business. However, there is a residual loss of time and opportunity. The loss of time and access to cryptocurrency can result impact buying or selling opportunities. Mitigate loss of time, access, and opportunity by maintaining account with multiple exchange accounts.
Reason #2: Posturing Yourself to Purchase or Sell
Unlike Bitcoin, Ethereum, and LiteCoin (which are offered on most exchanges), smaller and undervalued coins are only bought and sold on a limited number of exchanges. Establishing a new account with another exchange may be the only choice for pre-trade posturing. For example, a coin such as Cardano may only be offered at a handful of exchanges, which means establishing an account with exchange services such as Binance or HitBTC may be necessary. Incidentally, the HitBTC exchange service temporarily suspended service (mid December 2017) in response to a DDoS attack. This suspension of service created a scenario where regular buyers to establish accounts elsewhere to buy or cell theirs coins on an exchange. Maintaining multiple accounts also allows buyers and seller to posture in anticipation of market activities.
Reason #3: Mitigate Risk
As stated earlier, it is good practice to establish account to provide yourself with options for buying and selling cryptocurrencies. It is also important to protect yourself against loss, theft, and destruction of your cryptocurrency. For those three reasons, many cryptocurrency traders chose to mitigate those risks by funding online wallets, software wallets, and hardware wallets (or some combination in between). Catastrophic and criminal events can still occur despite our best efforts to protect our digital assets. That is why it is important to “never put your eggs in all of one basket.” Spread your cryptocurrency throughout multiple exchanges to avoid being a victim of a single catastrophic or criminal event. From an insurance stand point, it make sense to limit the amount digital currency below the insurance threshold that insures consumers against catastrophic losses. For example, many U.S.-based exchanges are FDIC insured and therefore offers minimal protection to consumer below a certain dollar amount.
Reason #4: Exchange Fees
Exchange service such as Coinbase and Gemini are often used as a gateway to purchase cryptocurrencies such as Bitcoin, Ethereum, and Litecoin. Each exchange offers a different rate schedule and incentives for buying, selling, exchanging, and sending cryptocurrencies. Most rate offer competitive prices and charges for similar services on the exchange. However, consumers drive competition in the market place. Maintaining accounts with multiple exchange services allows consumers to take advantage cost savings. The cryptocurrency transaction cost and the destination exchange will dictate the overall costs in purchasing or selling. Withdrawal fee can also be a consideration if converting cryptocurrency to fiat currency. Cost mitigation and the maximization of purchasing power are key aspects when planning to buy or sell cryptocurrency.
For those new to the cryptocurrency scene, know that there are many different types of cryptocurrencies available to purchase. Many of those cryptocurrencies can only be purchased using Bitcoin or Ethereum versus buying with fiat currency such as the U.S. dollar or Euro. It is recommended researching each exchange service while considering the reasons mentioned above as well as security related matters prior to transferring currency or connecting a bank account to a service.